• Service: Tax, Global Indirect Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 7/26/2013

Sri Lanka - Exchange control, tax provisions in 2013 budget 

July 26: Provisions in Sri Lanka’s 2013 budget included a proposal to “relax” Sri Lanka’s exchange control regulations.

Under these measures:

  • For a three-year period, corporate entities may borrow up to U.S. $10 million per annum (licensed commercial banks are allowed to borrow up to U.S. $50 million) without prior permission from the Exchange Control Department. Previously, foreign currency borrowings were restricted to specified industries.
  • Another provision would permit resident Sri Lankans and expatriates to transfer foreign savings into investments in foreign instruments, up to U.S. $5 million without prior approval. Previously, such investments required special approval from the Exchange Control Department.

Tax changes

Under recent tax amendments:

  • There is an exemption provided for interest accruing to any person outside Sri Lanka from investments in a security or bond issued by a person in Sri Lanka.
  • There is a “half-tax holiday” for a three-year period for a new company listed on the Colombo Stock Exchange, provided that 20% of its shares are publicly listed.
  • Any supply of services by a unit trust management company to a unit trust is deemed an exempt supply for value added tax (VAT) purposes.
  • The 10% concessionary income tax rate available to unit trusts has been extended to unit trust management companies.

Read a July 2013 report prepared by KPMG International: Sri Lanka – round-up of income & indirect tax reforms

The KPMG report also includes brief discussions of:

  • 2011 budget changes – simplification measures
  • 2012 budget – tax holidays
  • Customs duties simplified
  • Tax exemptions for strategic development projects

Read also the November 2012 analysis [PDF 816 KB] of Sri Lanka’s 2013 budget, as prepared by the KPMG member firm in Sri Lanka.

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